International Crime: Russian Organized Crime's Role and U.S. Interests

International Crime: Russian Organized Crime's Role and U.S. Interests

98-907 F
CRS Report for Congress
Received through the CRS Web
International Crime: Russian Organized Crime's
Role and U.S. Interests
October 30, 1998
(name redacted)
Specialist in International Relations
Foreign Affairs and National Defense Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report examines the serious problem of Russian-based transnational crime. It briefly
describes the make-up and activities of criminal groups in Russia, and government attempts
to fight them. The report analyzes the role of Russian organized crime internationally, its
presence in the United States, and the threat it poses for broader U.S. foreign policy
interests. The report looks at current U.S. and international efforts to combat the problem,
and the specific role of Congress. Finally, the report discusses options for strengthening the
international response to Russian-based crime. The report will be updated periodically as
events and legislation warrant. Related products include CRS Report 97-705, Crime in
Russia: Recent Developments and Implications for U.S. Security; CRs Report 98-642,
Democracy-Building in the New Independent States of the Former Soviet Union: Progress
and Implications for U.S. Interests; CRS Report 94-718, Crime in Russia: Context and
Implications for U.S. Interests; and CRS Report 95-486, Crime in Russia: Situation Update;
CRS Issue Brief 92089, Russia; and CRS Issue Brief 95077, The Former Soviet Union and
U.S. Foreign Assistance.

International Crime: Russia Organized Crime's Role
and U.S. Interests
Summary
International crime has become a major problem throughout the world.
Transnational criminal organizations have benefitted from the global economy, as
well as the break-up of the Soviet empire and birth of fragile new democracies,
vulnerable to criminal exploitation. Russian criminal groups have become
increasingly active in Europe and North America, sometimes working with foreign
crime groups. They have engaged in money laundering and trafficking in arms,
illegal goods, and people.
A growing share of organized crime in the United States has foreign roots,
including Russian ones. Besides its direct costs to the United States, Russian crime
threatens larger U.S. interests. First among these is the successful democratic and
market transformation of Russia and Eastern Europe. Crime and corruption have
undermined public support for democracy and the market economy and played a role
in the current Russian political and economic crisis. Russian criminals may be
fueling regional tensions and strengthening "rogue" regimes" with arms and other
sanction breaking trade. There is concern that they could seriously endanger
international non-proliferation efforts, if they get access to weapons of mass
destruction for sale abroad.
Governments and international bodies are struggling to keep pace with what is
now recognized as a global security threat. The State Department and FBI have been
given the lead U.S. role abroad in the fight against international crime. The United
States now has a permanent crime fighting presence in some 34 countries, including
Russia, for purposes of investigation, training, and other cooperation. The United
States has worked closely with Russia, and international organizations to curb
Russian international criminal activities.
In May 1998, the President announced a new International Crime Control
Strategy. Experts agree that further steps may be needed to fight transnational crime,
including better intelligence and law enforcement cooperation. Some experts
advocate more crime fighting assistance and training to Russia, multinational task
forces to fight crime across borders, and a more offensive and even preemptive
approach to fighting transnational crime. Effective cooperation is hampered by the
fact that most countries and jurisdictions are still reluctant to cede authority to
outside or multinational organizations.
The U.S. Congress has demonstrated concern over trends in Russian and other
international crime and supported assistance to Russia, the former Soviet Union, and
Eastern Europe in the law enforcement area. The Administration's proposed
International Crime Control Act of 1998 (S. 2303), a package of measures to enhance
the U.S. ability to fight international crime, was introduced in the Senate on June 14,
1998, by Senator Patrick Leahy but not acted upon by the 105th Congress.

Contents
Scope of the Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Who and What is Russian Organized Crime? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Russian Government Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Transnational Role of Russian Organized Crime . . . . . . . . . . . . . . . . . . . . . . 6
How Russian Crime Threatens U.S. Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Direct Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Presence in the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Role in International Drug Trafficking . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Crimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trafficking in Humans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Threats To Broader U.S. Security and Foreign Policy Interests . . . . . . . . . 11
Threat to Democratic Transitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fueling Regional Tensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Potential Access to Weapons of Mass Destruction . . . . . . . . . . . . . . . 13
U.S. and International Response to the Threat . . . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Cooperation with Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
International Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
G-7 Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
UN Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
OECD/FATF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Role of Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Options for A More Effective Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

International Crime: Russian Organized Crime's
Role and U.S. Interests
Scope of the Problem
Transnational crime has grown in recent years as a threat to international
security. Russian criminal organizations have emerged as significant and dangerous
actors in the equation. Several developments have contributed to the rising
international crime trends and threats:
--
The world is witnessing the emergence of a truly global economy, built on
unprecedented movement of people and goods across national boundaries,
and a revolution in information and communications technology.
Transnational criminal organizations have been major beneficiaries of
globalization. Criminal groups have learned to take advantage of the new
porousness of borders and to cooperate with each other on an opportunistic
basis. In the process, the lines have blurred among traditional crime
organizations, drug cartels, and terrorist groups.
--
With the end of the Cold War and fall of Communism in Russia and
Eastern Europe, the former rigid authoritarian government and police
controls have been removed but they have not yet been replaced by an
effective rule of law system in many of the new democracies. Given the
weakness and uncertainty of governments, the transition to market
economies has been chaotic and vulnerable to criminal exploitation.
Russian crime is just one piece of a worldwide problem. Russian crime
organizations are neither the biggest nor necessarily the most costly to international
society. To date, the Italian mafia, Latin American drug cartels, and Asian crime
organizations have had substantially greater impact, internationally and inside the
United States. Furthermore, Russian organized crime is just part of a larger CIS and
East European crime problem.
This report is focused specifically on crime emanating from within the current
borders of Russia, whether by ethnic Russians or other groups, recognizing that the
picture is similar in other former Soviet republics. Many observers would argue that
Russian organized crime deserves special attention. Russian crime groups are rapidly
expanding their international activities. More than criminal elements of other
countries, Russian criminal organizations could become a serious threat to
international stability and U.S. interests, due to Russia's geopolitical weight and
substantial military assets, coupled with the unsettled conditions that exist within the
country.

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FBI director Louis Freeh has said the United States is a leading importer of
international crime. By virtue of its wealth, stable financial system, and openness,
it appears to be a magnet for criminal money and activity. A substantial and growing
share of organized crime in the United States now has foreign roots and connections.1
As part of this trend, Russian criminal organizations have made their harmful
presence felt in the United States.
Russian organized crime is of particular concern to the United States because
of its possible impact in four areas:
--
Russian crime and corruption are undermining and eroding public support
for the democratic and market transformation of Russia, particularly
because of its links to official corruption and the still potent invisible
networks of former Communist bureaucrats, secret police, and disgruntled
military officers. Russia's current financial and political turmoil may be
seen in part as a result of the crime and corruption. As a result, the
Russian populace could opt for law and order, even if it meant a return to
more authoritarian rule and tighter central control of the economy.2
--
Crime and corruption from Russia are being exported to neighboring
countries and complicating the transition in other emerging democracies.
Securing stable democracy throughout this region remains a high priority
for U.S. policy.
--
Russian criminal organizations, with their possible access to large
quantities of arms, may be in a position to fuel regional tensions and
conflicts in hot spots such as the Balkans and Middle East by breaking
embargoes, smuggling weapons to combatants, rogue states, as well as to
terrorist and foreign criminal organizations.
--
Weapons from Russia's large increasingly vulnerable nuclear, chemical,
and biological stockpiles which some fear are inadequately protected could
be sold by corrupt officials and disgruntled soldiers in concert with
criminal organizations. Russian crime organizations could threaten our
efforts to combat proliferation of weapons of mass destruction and their
means of delivery by obtaining and selling such weapons.

A number of other CRS reports and issue briefs address related issues. (See also
CRS Report for Congress 97-705, Crime in Russia: Recent Developments and
Implications for U.S. Security; CRS Report 98-642, Democracy-Building in the New
Independent States of the Former Soviet Union: Progress and Implications for U.S.
1 U.S. Federal Bureau of Investigation, Department of Justice. The FBI Presence
Overseas: The Need for FBI Agents Abroad to Better Protect the United States from
International Crime and Terrorism. June 5, 1996, p. 6.
2 For a more detailed analysis of Russian corruption and the threat it poses for the
Russian democratic transition, see CRS Report for Congress 98-642F: Democracy-Building
in the New Independent States of the Former Soviet Union: Progress and Implications for
U.S. Interests.

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Interests; CRS Report 94-718, Crime in Russia: Context and Implications for U.S.
Interests; and CRS Report 95-486F, Crime in Russia: Situation Update; CRS Issue
Brief 92089, Russia; and CRS Issue Brief 95077, The Former Soviet Union and U.S.
Foreign Assistance.)
Who and What is Russian Organized Crime?
Organized crime in Russia has a long history with varying degrees of linkage,
tolerance, or lack thereof to the state. In the pre-Soviet period, Russia was plagued
with small scale crime like most European countries. Russian criminal gangs were
not linked to the state and government.
During the Soviet period, the police and authorities dealt harshly with traditional
criminals and did not tolerate independent criminal organizations, although crime
was probably a bigger problem than official statistics admitted. However, from the
earliest days of the Revolution, the Communist Party leaders did enlist and use
criminal groups and their tactics, when it suited their purposes. But those carrying
out large-scale illicit activities had to operate within the tolerated boundaries of the
Soviet system and with tacit approval of those in power.3
After the collapse of the Soviet Union and Communism, new opportunities for
organized criminal activity were provided by the weakening of the state and its police
institutions, as well as the freewheeling and unregulated nature of the economic
transition. The new reform-oriented Russian leaders recognized the vulnerability of
the economy to criminalization and sought to combat the rise in crime both
domestically and in cooperation with other countries. This effort has had mixed
results, to date.
Russia does not have a centralized criminal umbrella organization such as the
Italian mafia. Instead, organized criminal activity follows a more decentralized and
fragmented model where powerful gangs of varying sizes operate and have loose
links with one another. Russian organized crime today includes:
(1) Soviet era criminal gangs (in many cases tolerated and used by the previous
KGB and police, in other cases toughened by the previous dangers of operating
in an authoritarian state). These include ethnic and regionally-based gangs.
(2) New groups made up of disenfranchised and disgruntled former KGB,
police, military, and party officials who lost their power and livelihood with the
transition. Members of these groups have no particular commitment to the
success of Russia's transition. They still have contacts and leverage in Russia
and abroad, through their previous networks. The existence of these networks
and clandestine patterns of doing business make Russian crime particularly
difficult to combat. A German intelligence agency (BND) study has reportedly
concluded that in Russia today groups within the State Security Bureau (the
3 Virginie Coulloudon. The Criminalization of Russia's Political Elite. East European
Constitutional Review, Vol. 6, no.4, Fall 1997, p. 73-75.

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FSB) and officials of other Russian agencies are closely tied to crime groups.4
Such charges have been vehemently denied by Russian security agencies. In
addition, elements of the military including high ranking officers have been
implicated in criminal activity.5
Russian criminal groups have unprecedented access to specialists and expertise
in a number of fields. With the collapse of the Soviet system, scientists, engineers,
computer specialists, accountants, etc., displaced from their careers and unable to
find an adequate niche in the new Russian economy are susceptible to criminal
temptations, greatly increasing the technological and "professional" capabilities of
Russian criminal groups.
Most experts agree that there has been rapid growth in the number and impact
of Russian criminal organizations, although precise figures are unavailable. The
Russian Ministry of the Interior (MVD) estimates that there are some eight thousand
criminal groups with some 100,000 active members in the former Soviet Union.6
The FBI, which has a narrower definition of what is organized crime, says there are
over 300 major criminal organizations in Russia and the former Soviet Union. The
rising numbers of criminal organizations may reflect fragmentation and better
intelligence in uncovering them, as well as actual growth in criminality. Many
groups are little more than local street gangs. Others control crime in large regions
and sectors.
Criminal organizations have gained control of a significant share of the Russian
economy. The MVD has reportedly determined that organized crime controls 35
percent of commercial banks, 40 percent of the public sector of industry, 35 percent
of private enterprise, and a substantial share of joint ventures with Western
companies as a vehicle for laundering money.7 In 1995, the Russian government
estimated that criminal activities accounted for some 25 percent of GNP.8 More
recently, some Russian officials have conceded that as much as 50 percent of the
4 Germany's Der Spiegel magazine quoted in Reuters, October 16, 1997. For further
discussion of links among criminal, security and military organizations, see also Center for
Strategic and International Studies, Russian Organized Crime, 1997, p.32-33, 51-56.
5 Chief Military Prosecutor Demin told journalists that 14 former high-ranking generals
have been sentenced during the last two years, another 14 are under criminal investigation,
and 13 have been freed under a Duma amnesty which he criticized as allowing highly
decorated generals who masterminded some crimes to be freed, while the lower-ranking
officers who carried out those crimes serve prison terms. Radio Free Europe/Radio Liberty
Newline, July 30, 1998, pt. 1.
6 Testimony of FBI Director Louis Freeh before the Foreign Operations Subcommittee
of the Senate Appropriations Committee, April 28, 1998.
7 John M. Winer. International Crime in the New Geopolitics: A Core Threat to
Democracy. Appears in: William F. McDonald, ed. Crime and Law Enforcement in the
Global Village. Cincinnati, Anderson Pub., 1997. p. 52.
8 Kevin O'Brien and Jason Ralph, Using the Internet for Intelligence. Jane's
Intelligence Review, November 1997, p.526.

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economy is "shady", in some way connected to crime and corruption.9 As a result,
crime bosses make up a significant proportion of the new wealthy class in Russia.
Their economic activities are intertwined with those of legitimate businessmen. At
a time when there was no private capital in Russia they gained wealth from hasty and
sometimes rigged privatization, allowing stripping of assets and resources. At the
onset of privatization, sales and purchases were paper transactions. Apparently, only
the Communist Party, the KGB, government institutions, and criminal gangs had
assets. They competed among themselves in a scramble for export industries and
resources. Corrupt officials and criminals were able to pour their assets into newly
transformed enterprises and big banks, which they or their partners already
controlled.
Corrupt officials have been accused of funneling government tax revenues into
special banks under criminal control. These officials may also have given these
banks favored treatment with export licenses. When necessary, criminal groups have
been able to bribe many officials from top leaders down to local officials and police
on the beat, with what to them amounted to huge payoffs given their meager salaries.

The Russian Government Response
Russian leaders understand the severity of the crime problem and want to bring
it under control but they are also overwhelmed by it as they try to cope with a range
of critical problems. With Russia's economy in severe crisis it may be even harder
than before to muster the official attention and resources needed to fight crime
effectively. President Yeltsin has called crime and corruption the greatest threat to
the future of Russian democracy. At the same time, he and other Russian officials
are sensitive to overly alarmist foreign assessments of the problem, believing it
undermines public confidence, hurts investment, and is exaggerated.
The Russian President and his government hold ultimate responsibility for
controlling crime. The 1993 Russian Constitution gives a disproportionately large
share of power to the President, leaving weak judicial and legislative branches. Thus
far, Russian anti-crime efforts have had mixed results. For the first nine months of
1997, Russian statistics indicated a nine percent drop in overall crime. Yeltsin
praised the MVD for the success. However, this downward trend is not expected to
continue in the immediate future. Former Interior Minister Kulikov cautioned that
crime was likely to go up again in 1998 due to lack of resources.10 The 1997 decline
may also not represent much of a dent in the activities of the major criminal
organizations.
9 Gareth Jones. Russian Intelligence Body Denies Mafia Link Charges. Reuters,
October 16, 1997.
10 Christina Ling. Russia Sees No Decrease in Crime Rate in 1998. Reuters, November
5, 1997.

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The government has taken a number of recent actions to combat crime. In 1997,
the Interior Ministry targeted 100 criminal groups and investigated over 1000 people.
In November 1997, the Russian government announced a program to improve
coordination among law enforcement agencies in Russia which had been purposely
fragmented to break up the former police power of the KGB. In December 1997, the
Russian government approved a draft federal program to intensify the fight against
crime for the years 1998-2000. The program was to put law enforcement activity on
a new legal footing and improve the organization of law enforcement agencies.11 It
still did not provide for a centralized coordinating mechanism. A key component of
the program is to substantially increase funding for law enforcement. It is not clear
that Russia can come up with the money in its worsening financial situation.
Critics of the government's response to crime have charged that rather than
producing a more effective judicial system and enhancing law and order, many of
Yeltsin's actions have made scape goats of and replaced individual officials. They
argue that many of the government's anti-corruption moves look suspiciously like
political steps to redirect blame and remove potential rivals from power. Alexander
Lebed, while in the central government, was viewed by many in Russia as the
cleanest politician with the will to root out crime and corruption. He pushed
measures that many thought gave teeth to the government's anti-crime and corruption
efforts. He was dismissed by President Yeltsin, many believe due to political rivalry,
rather than the alleged shortcomings of his performance.
Some Western reports have accused the Russian government of turning a blind
eye to links between government agencies and criminal organizations. As individual
security and other agencies face desperate shortages of funding, they have been
encouraged by Russian leaders to seek alternate funds. This has been interpreted, at
least by some security officials as a green light to work with the "the mafias" for
profit.12
The Transnational Role of Russian Organized Crime
Russian criminal organizations have steadily expanded their activities abroad,
beginning with other countries of the former Soviet Union and Eastern Europe.
Alone or in cooperation with local gangs, Russian crime groups have gained a
foothold in other countries of the former Soviet Union. They were able to use old
links and their familiarity with the terrain. When Soviet troops were withdrawn from
Eastern Europe, some Russian soldiers deserted, remained behind, and became
involved in crime. This is not to blame crime in neighboring countries mainly on
Russians or to suggest that indigenous crime is not a major problem there. Crime is
a serious home-grown problem in most of these countries, exacerbated by conditions
similar to those in Russia. However, the impact of imported Russian crime is
significant and in some countries Russian criminal groups have a large impact.
11 Moscow Interfax, December 4, 1997.
12 Kevin O'Brien and Jason Ralph, Using the Internet for Intelligence. Jane's
Intelligence Review, November 1997, p.527.

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The Russian criminal presence has also expanded well beyond the former Soviet
Bloc. Russian groups have become increasingly active in Germany and Western
Europe. They are present in Latin America, the Caribbean, and Canada, as well as
the United States.13
Russian organized crime has used a number of tools to extend its international
reach:
! It has infiltrated and bought up Russian enterprises, banks, and industries with
strong international focus and connections.
! Russian criminal groups have sought to gain control over goods and resources
that have strong illicit markets abroad, including arms, precursor materials
needed for the manufacture of weapons of mass destruction, and strategic
minerals.
! Like Italian, Chinese, and other criminal organizations, Russian groups use
their own national emigre communities abroad to hide and base operations.
Thus, they are active in former Soviet countries with large Russian minorities,
and other countries with significant Russian emigre communities, including
the United States, Israel, Canada, Australia, and Germany. Ethnic
communities are also the principal victims of Russian crime and extortion in
those countries.
According to Russian MVD estimates, Russian criminal incidents abroad have
grown 5 fold since 1991. Within the Commonwealth of Independent States (CIS),
crime doubled in five years. The MVD estimates that 400 Russian groups operate
abroad worldwide.14
In 1998, the FBI said that Russian based crime groups operate abroad in 54
countries, mainly in Europe and North America. FBI field offices in 34 foreign
capitals were dealing with cases involving Russian crime groups. However, in trying
to measure their impact, Russian criminal groups are difficult to separate out from
other groups. For example, some 70 percent of Russian groups operating in the U.S.
also have links to Ukrainian criminals. FBI Director Freeh told Congress in April
1998 that of Russian crime cases abroad investigated by the FBI, 55 percent involve
fraud, 22 percent money laundering, the rest murder, extortion, smuggling of humans,
arms, and drugs.15
As Russian organized crime spreads abroad, it is both cooperating and
competing increasingly with other crime groups. The FBI states that Russian
criminal groups have known links with 50 foreign crime organizations in 29
13 Center for Strategic and International Studies. Russian Organized Crime: Global
Organized Crime Project. Washington, D.C., 1997, p. 42.
14 First Deputy Interior Minister Vladimir Vasiliev at a news conference in Moscow.
Radio Free Europe/Radio Liberty Newsline, November 26, 1997, Part I.
15 Testimony of FBI Director Louis Freeh before the Foreign Operations Subcommittee
of the Senate Appropriations Committee, April 28, 1998.

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countries. They are working with the Italian mafia, as well as Colombian and other
Latin American drug cartels. Russians criminals have cooperated with Nigerian,
Turkish, Japanese, Chinese, and Korean criminal groups, in drug trafficking, money
laundering, and counterfeiting.16 The extent of these links is uncertain. They are
probably sporadic, opportunistic, and unreliable, given the absence of " honor among
thieves".
How Russian Crime Threatens U.S. Interests
Russian crime threatens U.S.interests in a number of ways, both directly and
indirectly. While the Russian criminal presence in the United States is significant
and growing, most law enforcement officials believe the problem is manageable and
should not be exaggerated. However, Russian criminal activities in other parts of the
world may have strong impact on U.S. security and foreign policy interests.
Direct Threats
Presence in the United States.17 By some measures, the United States would
not appear to be a very attractive target for international crime. Compared to many
countries in which international crime groups are active, the United States has strong
legislation, relatively little official corruption, and the will to fight crime. On the
other hand, several factors make the United States attractive to international
criminals: (1) the relative openness of U.S. borders; (2) the legal protections of
privacy, free movement, and civil liberties offered by the American system; (3) the
exploitable division of justice and law enforcement among local, state, and federal
government jurisdictions;18 (4) America's wealth, financial stability and security, and
the fact that the dollar is the dominant international currency; and (5) the presence
of well established emigre communities into which criminals can melt. As a result,
Russian and other international criminal organizations target the United States very
actively.
The exact nature and extent of Russian criminal activity in the United States is
difficult to assess. Some 25 major Russian groups operate in the United States
according to the FBI. They concentrate their activities in major cities, such as New
York, San Francisco, Los Angeles, Miami, Chicago, Boston, Denver, Seattle,
Cleveland, Detroit, and Philadelphia.19 The Russian emigre community of Brighton
Beach, NY, initially a center for Jewish immigrants but now housing many other
16 Phil Williams. Transnational Criminal Organizations: Strategic Alliances.
Washington Quarterly, vol. 18, Winter 1995, p.57-72.
17 See also CRS Report for Congress 97-705F, Crime in Russia: Recent Developments
and Implications for U.S. Interests.
18 Louise I. Shelley. Transnational Organized Crime in the United States: Defining the
Problem. Presentation at the National Research Council Workshop on Transnational
Organized Crime, Washington, DC, June 17 and 18, 1998.
19 Statement by FBI Director Louis Freeh before the Senate Select Committee on
Intelligence, January 28, 1998.

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Russian and former Soviet emigres, is considered a major base of operations for
Russian criminal groups.20
Russian criminal organizations in the United States are engaged in money
laundering and other illegal financial activities, drug trafficking,, and running
prostitution rings. They have been tied to several major scams collecting fraudulent
fuel excise taxes. They collaborate with the Italian mafia, Colombian drug cartels,
and other foreign groups.
Role in International Drug Trafficking. Russian criminal groups have
become active in the illicit drug trade. This is not surprising since it is still the most
lucrative business for criminals, with worldwide profits thought to make up as much
as two percent of global GNP. Russian criminal gangs are connected to Central
Asian drug traffickers. Russia has become the main conduit for drugs from Central
Asia and other parts of the world to Europe, East and West. Russian crime groups
are reported to be developing synthetic (designer) drugs, as well. In 1997, drug-
related crime tripled in Russia, at a time when there was an overall decline in Russian
crime of 9 percent. In recent years, large amounts of Colombian cocaine have been
seized in Russia. In the process drugs have become a growing domestic problem for
Russia. There are now an estimated 2 million Russian drug addicts.21
New transnational patterns are becoming apparent in international drug
trafficking. A number of recent big drug busts have involved criminal groups from
more than one country including Russia. The FBI has found clear links between
Russian criminal groups and Colombian drug cartels operating in Miami.
Financial Crimes. Russian crime gangs have been very skillful in using
technology to steal, defraud, and evade the law. Russians and East Europeans,
known for their computer and programming skills, have been very resourceful in
perpetrating computer crimes. Criminals are able to draw on highly trained,
underemployed computer specialists.
Money laundering is a particular concentration of Russian criminal activity,
especially in the United States. It is estimated that Russian gangs launder billions of
dollars each year. Russian groups reportedly use shell companies, investments, and
bank accounts in Cyprus, Switzerland, Austria, Liechtenstein, Persian Gulf emirates,
and offshore banking centers. It is estimated that in Cyprus alone Russian criminal
groups have laundered some $12 billion per year. Some analysts believe that more
than 60 percent of joint ventures between Russian and foreign firms are thought to
be fictitious, established solely for purposes of money laundering.22
20 Reuters, July 9, 1998: Officials Crack Alleged Russian Mob Ring in New York,
21 Interior Minister Anatolii Kulikov quoted by ITAR-TASS. Radio Free Europe/Radio
Liberty Newsline, January 8, 1998.
22 John M. Winer. International Crime in the New Geopolitics: A Core Threat to
Democracy. Appears in: William F. McDonald, ed. Crime and Law Enforcement in the
Global Village. Cincinnati, Anderson Pub., 1997. p. 64.

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Since 1991, billions of dollars in Russian assets have been sent abroad, legally
and illegally.23 Not all of this money is criminal or "laundered". Some 80 percent
of all enterprise hard currency assets is reportedly sent abroad. Even international
foreign aid money is said to have wound up in secret accounts in Western countries.24
A major portion of this money represents criminal profits, for the most part untaxed.
As a consequence of Russian capital flight, which is not likely to subside in
view of the country's financial crisis, there is very little domestic investment in
Russia. Because so much of the new wealth is built on extraction of resources for
export, the interests of the groups who control the resources may not be tied to
general Russian welfare, economic conditions, or consumer spending capacity. The
new Russian tycoons, unlike the American Robber Barons of old to whom they are
sometimes compared, do not for the most part reinvest their profits in Russia. They
prefer to send their wealth abroad.25
Capital exported to the West by criminals often remains under their control may
eventually be used for further criminal activity.
Trafficking in Humans. One of fastest growing areas of criminal activity and
one that is of particular concern to the U.S. Congress is the smuggling of illegal
aliens across borders and trafficking in women and children for prostitution.
While the smuggling of illegal aliens is more the focus of Chinese, Asian,
Mexican, and Central American groups, Russia and the former Soviet Union are now
believed to be the principal source of trafficking for prostitution and the sex industry.
According to NGO estimates, between 1 and 2 million women are trafficked each
year world wide. The main source countries are Russia, Ukraine, Belarus, Poland,
and the Baltic states. In addition, several Central and East European countries are
reported to be both receiving and transit countries.
Increasingly, this trafficking for the sex trade is controlled by big Russian crime
groups, often in cooperation with foreign criminals in Turkey, Yugoslavia, Italy, and
Japan. Russian criminals use marriage agency databases to find and lure victims.
They place advertisements in the newspapers for good jobs abroad. As urban women
become more suspicious of scams and dangers, these gangs move their recruiting
efforts to villages and rural areas.26
23 It is impossible to get precise data on the amount of money that has left the country.
Estimates range between 60 and 300 billion dollars.
24 Former National Security Advisor Zbigniew Brzezinski cited in Center For Strategic
and International Studies, Russian Organized Crime, p. 38.
25 Christian Lucky. Public Theft in Early America and Contemporary Russia. East
European Constitutional Review, Vol. 6, no.4, Fall 1997, p.98.
26 U.S. Department of State. Bureau of Consular Affairs. Fraud Digest,
November/December, 1997.

CRS-11
Most victims are sent to Western Europe, Asia, and the Middle East. Many
victims also end up in the United States. Some two-thirds of women trafficked to
Western Europe for sexual exploitation are from the former Soviet Union.
Women trafficked to the United State, most often wind up in New York,
Florida, California, and Hawaii.27 A small minority of women come knowingly as
prostitutes. Most are lured with false promises of work and are then forced into labor
to pay back substantial fees for smuggling them to their destination.
In addition to trafficking, Russian criminal groups are gaining control of
prostitution in many parts of Europe and the United States.28 It is a booming business
in which instead of one-time profits from smuggling their victims, they can continue
to make money off the same victims. It is a business in which the criminal gangs
face relatively low risks of capture and punishment. Until recently, there has not
been much official help or even sympathy for the victims. Often the victims were the
ones punished when caught. However, the issue is gaining greater attention.
European countries have signed a convention to fight the problem. The United States
and the EU agreed on a joint initiative to combat trafficking in November 1997.29
The U.S. Congress is also focusing new attention on the issue.

Threats To Broader U.S. Security and Foreign Policy Interests
Threat to Democratic Transitions. Since the end of the Cold War, the United
States has viewed the successful transition of Russia and Eastern Europe to
democracy, the rule of law, and a market economy as the best assurance of future
European and international security. Russian and East European crime and
corruption have the potential to distort and even derail the transition to democracy
in Russia and cause national disillusionment in the process. Already, a substantial
minority of Russians believe that Russia is ruled by organized crime. Many more see
criminals as reaping most of the benefits of capitalism while the rest of the
population pays the price. Increasing numbers of Russians believe that crime is one
of the leading threats to Russia. Forty percent of Russians polled at the end of 1997
felt personally threatened by crime and some thirty-four percent by corrupt
officials.30 This sentiment has probably increased significantly with the collapse of
the Ruble and economic turmoil that hit Russia in the summer of 1998.
The costs to Russia of organized crime are in the billions of dollars, just in lost
tax revenues, sharply limiting what the government can do to help its citizens through
the rough transition period. On the other hand, criminal organizations are finding
a void to fill precisely because of the weakness and even impotence of many
27 Ibid., p. 4.
28 Global Survival Network. An Expose of the Traffic in Women for Prostitution from
the Newly Independent States. Washington, D.C., 1998, p .5-10.
29 Fact Sheet: US-EU Initiative to Prevent Trafficking in Women. USIS Washington
File, December 5, 1997.
30 Moscow Interfax, November 12, 1997.

CRS-12
government institutions. For example, businesses pay criminals to ensure their
security and to enforce contracts which the weak and corrupt courts cannot do.
Some Western observers have expressed the fear that Russia could become a
criminal state. A study by a Center for Strategic and International Studies Task
Force on Russian Organized Crime found that in the absence of significant reform,
Russia is likely to become a "criminal syndicalist state", one which is governed by
corrupt officials, working with criminals, and unscrupulous businessmen. The study
concludes that in many respects, Russia has already reached this state.31
While the Russian government is not ruled by corruption in the view of most
experts, the impact of Russian crime is definitely magnified by its strong links to
official corruption. Not only do corrupt officials countenance crime but criminal
organizations encourage and feed public corruption. In many cases, high level
officials charged with fighting crime are working with the criminals.
The lines are not always clearly drawn between legitimate and unethical activity
by officials. A number of observers have pointed out that Russians do not yet have
a strong understanding of the concept of conflict of interest. Even officials who view
themselves as honest and serving the public good, countenance or participate openly
in what would be considered conflict of interest activities unacceptable in established
democracies, all the time viewing this as normal behavior under capitalism.
Until parliament passed a law barring private company positions for those
holding public office in 1996, many senior government officials also held senior
positions on boards of enterprises. Since 1996, one can see a revolving door, with
people going back and forth between officialdom and enterprises. There are still few
checks and balances to correct misdeeds in the young Russian democracy. The
legislature and judiciary are very weak under the 1993 Russian Constitution.32
Crime is becoming a central issue in the eyes of the general Russian public. A
sizeable proportion of Russians saw law and order as the main issue in Russia, prior
to the economic and political crisis that erupted in mid-1998. They are likely to
blame the President for the crime situation, since he holds most of the power in
Russia today. Coming elections may well favor those who are perceived as
incorruptible and tough on crime. Several experts have pointed to Alexander Lebed
as a potential beneficiary of such sentiment.33 The broader implications of this
sentiment are unclear. The main concern from the perspective of U.S. interests is the
31 Center for Strategic and International Studies. Russian Organized Crime.
Washington, 1997, p. 26.
32 Virginie Coulloudon. The Criminalization of Russia's Political Elite., p. 75-78;
Christian Lucky. Public Theft in Early America and Contemporary Russia, p.98. Both in
East European Constitutional Review, Vol. 6, no.4, Fall 1997.
33 Lebed is a retired general who gained fame as the commander of Russian forces in
Moldova and the broker of peace in Chechniya. He was for a time the head of Yeltsin's
national security committee and is now a regional governor. He is a leading candidate for
the Presidency. He has gained a reputation as an incorruptible champion of law and order,
though some have seen him as somewhat authoritarian.

CRS-13
possibility that Russian voters could accept a return to more authoritarian rule in the
interest of cleaning up crime and corruption. This sentiment might be strengthened
by the country's worsening financial crisis.
Fueling Regional Tensions. Tensions and conflicts in Europe, the Middle East,
and other parts of the world may provide opportunities for international criminal
exploitation. Criminal organizations have a history of involvement in breaking
embargoes, smuggling arms, petroleum, and other needed goods to warring parties
and governments facing international sanctions.
Russian criminals may have a comparative advantage in the arms trade area.
With the help of corrupt officials and members of the military, they are likely to have
relatively easy access to large quantities of arms, fuel, and other supplies. They could
use local criminal organizations as intermediaries to find buyers and make deliveries.
The concern about potential criminal involvement in smuggling goods to warring
parties in defiance of embargoes is especially strong in volatile places such as the
former Yugoslavia or along the Russian periphery in the Caucasus and Central Asia.
Some analysts are concerned that Russian criminals might become involved in selling
weapons or components to rogue regimes such as Iran, Libya, Iraq, Syria, and North
Korea, and even to terrorist groups.
Russian officials downplay this problem and maintain that some of the
transactions attributed to criminals in fact have been what they consider legitimate
sales by the Russian government and enterprises. They accuse the United States, as
a major exporter of arms and technology, of hypocrisy, holding other countries to
a different standard than our own.
Potential Access to Weapons of Mass Destruction. One of the greatest
concerns is that Russian criminal organizations could get their hands on and attempt
to sell weapons of mass destruction, threatening to undermine global efforts to curb
the spread of nuclear, chemical, and biological weapons. In response to questions
posed by the Senate Intelligence Committee in December 1997 and released by the
Committee, C.I.A. Director George Tenet reaffirmed U.S. concerns over the possible
loss or theft of nuclear weapons and materials. The fears are heightened by periodic
reports of lax controls and corruption at nuclear, biological, and chemical facilities
that have accompanied the deterioration of the Russian armed forces. A number of
nuclear thefts from Russian submarine bases have been reported. The FBI has raised
concerns about the vulnerability of Russian and East European radioactive materials
to theft and diversion, pointing to the seizure of significant amounts of cesium in
Lithuania and Uranium in the Czech Republic.34 Many suspect that the Russian
authorities may not have a very tight inventory of their nuclear, chemical, and
biological weapons stockpiles. (See also CRS Report 97-102, Nunn Lugar
Cooperative Threat Reduction Programs: Issues for Congress; and CRS Issue Brief
98038, Nuclear Weapons in Russia: Safety, Security, and Control Issues).

34 Testimony of FBI Director Louis Freeh before the Foreign Operations Subcommittee
of the Senate Appropriation Committee, March 12, 1996.

CRS-14
The threat of nuclear weapons smuggling by criminal organizations is still more
theoretical than real. Criminal organizations have shown little interest, so far,
probably because of the physical dangers involved in the handling, storage, and
transport of such materials and the difficulty of finding genuine buyers, as opposed
to undercover police stings. Given the difficulties and dangers involved in arranging
and carrying out a nuclear weapons sale, criminal groups may be inclined to find
more lucrative and less risky activities in other areas.
To date, there have been few incidents of trafficking in nuclear material and
those have been rather amateurish, not showing the fingerprints of more sophisticated
criminal organizations. Nuclear materials apprehended have been either far below
weapons-grade or very small in quantity. Most have been smuggled via Europe,
though nuclear materials have also been apprehended in the Caucasus with ultimate
intended destination unknown. These have posed at most a low grade environmental
hazard. But even low grade nuclear materials could pose a serious public danger, for
instance in the hands of terrorists. British intelligence reportedly has been
investigating the possibility that the Provisional IRA may have tried to buy fissile
materials from Russia.35
A more immediate threat has been the involvement of criminal groups in the
sale of dual-use goods, non-fissile materials used both in building nuclear weapons
and in civilian manufacturing. Markets are larger and easier to find.
Still, the potential danger exists, that Russian criminals could turn their attention
to the smuggling of nuclear, biological, and chemical weapons, as trafficking
networks expand and potential payoffs grow. Russian criminal groups are more
likely to be able to get access to nuclear materials, especially with the collusion of
military and government officials, than criminal organizations of other countries.
Both governments and terrorist groups, aspiring to nuclear, biological, and chemical
weapons status may be prepared to pay large sums for key components.
U.S. and International Response to the Threat
Until recently the United States and other countries viewed international crime
solely as a law enforcement problem to be handled by national and local police
agencies. Now there is a growing awareness that it is a security and foreign policy
threat, requiring a broad interagency and international response.
U.S. Actions
The State Department has been given an enlarged role in the fight against
international crime. It has negotiated extradition treaties, mutual legal assistance
agreements (including one with Russia in 1997), and information exchange
agreements. The State Department has also played a role in foreign law enforcement
training.
35 Kevin O'Brien and Jason Ralph, Using the Internet for Intelligence. Jane's
Intelligence Review, November 1997, p.527.

CRS-15
In 1993, the responsibilities of the State Department were expanded to include
international organized crime. The responsible bureau was renamed the Bureau of
International Narcotics and Law Enforcement Affairs (INL). A new Office of
International Criminal Justice was established under the Bureau. It has the lead role
in the U.S. response abroad to international crime, especially in the areas of money
laundering, commercial fraud, and trafficking of all kinds. Under the Anti-Crime
Training and Technical Assistance program (ACTTA) started in 1994, it also has the
lead in coordinating law enforcement assistance and training for Russia and other
countries.

The Federal Bureau of Investigations has increased its international role. It now
has a permanent presence in more than 34 countries for purposes of investigation,
training, and law enforcement cooperation. This has included a very active program
of bilateral cooperation with police agencies of Russia and other former communist
countries. The FBI role in other countries also often involves investigation of
Russian criminal activities.
The State Department and FBI have cooperated on the President's International
Law Enforcement Initiative. This is an effort to enhance global law enforcement
through a number of steps aimed at strengthening links with and among foreign
police, strengthening foreign law enforcement agencies, especially in former
Communist countries, and promoting the rule of law in new democracies, especially
Russia.
Specific programs and initiatives36:

! The Legal Attache Program. U.S. Embassy legal attache offices have been
opened in 32 countries to provide liaison, enhance cooperation, and exchange
information regarding law enforcement. An office was opened in Moscow in
1994. It started with 32 crime cases and by 1998 was dealing with some 300.
Other offices in former Communist capitals were opened in Kiev, Tallinn, and
Warsaw.
! International Training Programs. These programs, carried out in the
United States and in recipient countries, have trained some 18000 foreign law
enforcement officers from 60 countries, including many from Russia, the
C.I.S., and Eastern Europe.
! The United States established an International Law Enforcement Academy
in Budapest, Hungary in 1995 primarily to train police officers from Russia,
the CIS, and Eastern Europe. By the end of 1997, some 630 officers from 20
countries had been trained at the academy. A principal aim of the academy
is to strengthen links and create networks among police forces.
36 Testimony of FBI Director Louis Freeh before the Foreign Operations Subcommittee
of the Senate Appropriations Committee, April 28, 1998.

CRS-16
In May, 1998, President Clinton announced a new International Crime
Control Strategy to combat global crime.37 It includes 10 Administration initiatives
to better combat drug and firearms trafficking, illegal alien smuggling, trafficking in
women and children, terrorism, money laundering, computer theft, public corruption
and other crimes. The eight goals and thirty objectives spelled out in the report are
meant to set priorities in the U.S. fight against international crime. The report
released by the White House was called a blueprint for the fight against the growing
threat of international crime.38 The first initiative under the strategy is proposed new
legislation, the International Crime Control Act of 1998, discussed in the section
on the role of Congress.
Cooperation with Russia
The Russian government has cooperated extensively with the United States and
the international community in the fight against international crime . Cooperation has
intensified with the establishment of the U.S. legal attache office at the Embassy in
Moscow.39
The United States established a number of assistance programs for Russia,
including the Rule of Law program to strengthen overall democratic structures.
Bilateral assistance has been provided to strengthening law enforcement capabilities.
The United States and Russia have worked together to curb Russian
international criminal activities and U.S. agencies have been pleased with the level
of cooperation, through information sharing and coordinated action. A regular series
of meetings between Vice President Gore and Russian Prime Ministers has led to the
signing of agreements on law enforcement cooperation in 1995 and the establishment
of a bilateral group to combat commercial crime in 1996. On July 24, 1998, Vice
President Gore met with Russian Prime Minister Kirienko. No specific agreements
on fighting crime came out of the meetings, but Russia agreed to take action against
firms that have violated Russian export controls by shipping sensitive technology to
Iran.40
U.S. Russian summit meetings have also dealt with the issue of Russian crime.41
At the September 1998 Clinton-Yeltsin Summit in Moscow the two Presidents
focused on one aspect, agreeing to intensify bilateral cooperation by creating seven
37 International Crime Control Strategy. The White House, May 1998.
38 White House Press Briefing on Global Crime Control Effort. USIS Washington File,
May 12, 1998.
39 See also CRS Report for Congress, 97-705F, Crime in Russia: Recent Developments
and Implications for U.S. Interests, by (name redacted).
40 Radio Free Europe/Radio Liberty Newsline, July 27, 1998, pt. 1.
41 See CRS Report to Congress 97-705F, Crime in Russia: Recent Developments and
Implications for U.S. Interests, p. 10-11.

CRS-17
working groups on export controls to further strengthen Russia's ability to halt the
spread of dangerous weapons.42
In some high profile recent police cases, U.S. and Russian law enforcement
agencies cooperated in bringing down several Russian crime kingpins in the United
States. The two countries have worked effectively against financial and computer
crime, drug trafficking, and kidnapping cases.
The cooperation is not without friction. Russian officials reacted strongly to
FBI Director Freeh's statements before 1997 that Russian crime poses a significant
threat to U.S. national security. Former Russian Federal Security Service Director
Nikolai Kovalev protested that such statements are likely to limit foreign investment
in Russia. He cited foreign security service sources to make the argument that only
0.2 percent of crime abroad is committed by former citizens of Russia and the former
Soviet Union.43 Since then U.S. officials have significantly toned down their own
characterizations of the problem. In November, 1997 FBI Director Freeh said in
Moscow that crimes by Russians or Russian groups do not threaten the domestic or
national security of the United States. He indicated that their impact was serious but
less than other groups operating in the United States. In April 1998, FBI Director
Freeh testified before the Foreign Operations Subcommittee of the Senate
Appropriations Committee, again emphasizing the serious and growing threat posed
by Russian crime.44
International Initiatives
European Union. The European Union has its own programs to stem Russian
and East European crime. It has established the so-called Octopus program. Crime
experts from EU countries are sent to the region to gather information. They issue
reports on the situation in each country and offer guidelines for responding. After the
Schengen Convention of 1990 among EU countries was put into force, borders were
opened between participating EU member countries to people, business, and in the
process to criminals. Europol was established by the European Union in 1995 to
enhance European cooperation in the fight against crime. To date, Europol is little
more than an information clearinghouse, with a small budget and few staff. It does
not open the way for national law enforcement agencies to act against criminals
across borders. Thus, Russian and other criminal organizations that have penetrated
Western Europe can more easily expand their activities throughout the EU but law
enforcement officials must respond in a fragmented manner.45
In 1995, U.S. and EU presidents signed a new Transatlantic Agenda to
establish broader cooperation in many areas. Special emphasis was placed on
42 Moscow Summit press briefing, September 2, 1998.
43 Moscow Interfax, December 3, 1997.
44 Testimony of FBI Director Louis Freeh before the Foreign Operations Subcommittee
of the Senate Appropriation Committee, April 22, 1998.
45 John M. Winer. International Crime in the New Geopolitics: A Core Threat to
Democracy, p. 57.

CRS-18
fighting organized crime, terrorism, drug trafficking, smuggling of aliens and
women.46 In November 1997, U.S. and EU officials met in Luxembourg to launch
a jointly funded initiative against trafficking in women from Russia and Eastern
Europe. It is primarily an information campaign, warning potential victims and an
education program for law enforcement, customs and consular officials to heighten
their awareness of the problem. Pilot projects were launched in Poland and Ukraine.
If they are successful, the program will be expanded.
G-7 Initiatives. In 1995 the G7 group of leading industrial states plus Russia
established an experts working group on transnational organized crime at its meeting
in Halifax, with the encouragement and active participation of the United States and
Russia. In their May 1998 Birmingham communique, G-7 leaders concluded that
international crime posed a profound threat to the democratic and economic
foundations of societies through criminal investments, money laundering, corruption
of officials and institutions, and eroding public confidence in democratic institutions.
The Birmingham G-7 Summit endorsed a number of steps and committed the
governments to further action on high technology crime, to harmonizing legislation
on money laundering and financial crime, to developing shared strategies against
corruption, and to enhancing cooperation to stem smuggling of firearms and human
beings. These measures followed up on the G7 commitment in Lyons to work to
transcend borders to fight crime, to establish common rules, approaches, and
standards, to make their law enforcement systems interoperable. The G-7 also
pushed for completion of a UN convention against transnational organized crime by
the year 2000.47
UN Efforts. The UN has established a Commission on Crime Prevention and
Criminal Justice under the Economic and Social Council. The United States and
Russia have worked with the Commission to establish goals, priorities, and a
timetable of action. The United States has helped to fund improvements to the UN
Crime Commission database for use by all law enforcement agencies.
The United States is also helping to fund the UN affiliated Helsinki European
Institute to expand its crime clearinghouse function for criminal justice training and
cooperation programs, to avoid duplication and rationalize efforts in Russia and
Eastern Europe.48
In 1994, a world ministerial Conference on Transnational Organized Crime was
held in Naples Italy. The UN General Assembly approved the Naples Declaration
and Global Action plan, including the proposal to hold a Convention on International
Crime. In 1996, the UN General Assembly called on the Commission on Crime
46 Report of the Office of International Criminal Justice, U.S. Department of State,
Winter 1996, p. 6.
47 The Birmingham Summit: Final Communique, May 17, 1998.
48 Report of the Office of International Criminal Justice, U.S. Department of State,
Winter 1996, p. 6.

CRS-19
Prevention to give urgent priority to preparing such a convention. The first experts
meeting to prepare the Convention was held in Warsaw in February 1998.
OECD/FATF. Money laundering, the process whereby criminal proceeds are
legitimized, is essential to organized crime. The Financial Action Task Force was
established alongside the Organization for Economic Cooperation and Development
in 1989 to fight international money laundering. It has 26 member countries plus the
European Commission and the Gulf Cooperation Council. At its ministerial meeting
in April 1998, the FATF again stated that money laundering posed a serious threat
to democracy and to the soundness of the international financial system and pledged
members to full implementation of a package of 40 recommendations to combat
money laundering agreed on in previous meetings. The FATF defined a five-year
plan (1999-2004) to spread the fight against money laundering to all regions of the
world. Emphasis was placed on more effective cooperation among law enforcement,
judicial, financial, and regulatory disciplines.49
Russia is not currently a member of FATF even though it is a major source of
money laundering. It has not been seen, in the past as meeting all the criteria for
membership. The organization has set as a high priority bringing in strategically
important countries which meet certain criteria including a commitment to end
money laundering. The organization could be strengthened by bringing in Russia.
In November 1997, the OECD adopted a Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions. It was aimed
specifically at fighting official corruption linked to organized crime, which was
deemed a significant threat to stable democratic institutions, the rule of law, and
human rights.50
Role of Congress
The U.S. Congress has expressed growing concern and sought legislative
vehicles to reverse recent upward trends in Russian and other transnational crime.
A series of hearings have been held specifically on Russian crime by the House
International Relations Committee, the Senate Foreign Operations Subcommittee,
and the Senate Select Committee on Intelligence. Senior FBI and State department
officials are frequently questioned on the issue when they testify before Congress.
The House and Senate have supported and funded assistance to Russia, the
former Soviet Union, and Eastern Europe in the law enforcement area. For FY1998,
Congress appropriated $770 million in total assistance under the New Independent
States account of the foreign operations appropriations bill, a 23% increase from the
previous year's appropriation and 14% less than the Administration request. After
a congressionally mandated 50 percent cut in aid to Russia, from which crime
49 OECD News Release, April 28, 1998.
50 Euopa 40 Plus, December 1997 (www.coe.fr/europa40)

CRS-20
fighting assistance was not exempted, some $5 million of that amount went to law
enforcement and judicial assistance to Russia.
The FY 1999 Omnibus Consolidated and Emergency Supplemental
Appropriations Act (P.L. 105-277) was adopted by Congress and signed by the
President on October 21, 1998. The Act provides $847 million for the Newly
Independent States, including Russia, $78 million less than the Administration
request, $107 million more than the Senate earmark, and $257 more than the House
earmark. $801 million was appropriated under the NIS account section of the foreign
operations section of the bill, and an additional $46 million was appropriated as an
emergency supplemental. The bill limits assistance appropriated to any one country
under the NIS account section to no more than 30% (i.e. $240.3 million). The
measure included law enforcement assistance to Russia. Under Foreign Operations
(Sec.101), some $5.5 million were provided for law enforcement and judicial
assistance and training, again assuming a 50 percent cut of amounts appropriated,
as a result of continued Russian sales of nuclear and missile technology to Iran. (See
CRS Issue Brief 95077, the Former Soviet Union and U.S. Foreign Assistance; and
CRS Report 98-211, Appropriations for FY1999: Foreign Operations, Export
Financing, and Related Programs).
Under the Nunn- Lugar Cooperative Threat Reduction Program, Congress has
provided assistance to Russia, among other things, to secure and safeguard nuclear
weapons and material from loss or theft. The assistance is provided under the
Defense Department authorizations. Bills before the House (H.R. 3616) and Senate
(S. 2057) would again authorize funds for this purpose.
As part of its announced new international crime control strategy, the
Administration transmitted to Congress the proposed International Crime Control Act
of 1998. The bill (S. 2303) was introduced in the Senate on June 14, 1998. It was
transmitted to the House on June 9 and referred to several committees.51 The bill
aimed to close the gaps in current federal law, criminalize additional types of harmful
activities, and strengthen domestic and foreign criminal justice systems. In his letter
of transmittal, the President stated that the proposed legislation would "substantially
improve the ability of U.S. law enforcement agencies to investigate and prosecute
international criminals, seize their money and assets, intercept them at our borders,
and prevent them from striking at our people and institutions." It would strengthen
the ability to punish those who commit crimes against Americans abroad, strengthen
controls at U.S. borders, deny safe havens to international fugitives, and allow for
seizure and forfeiture of assets. It would also permit U.S. law enforcement agencies
to share the seized assets of international criminals with foreign law enforcement
agencies, provide for extradition of fugitives even in some cases where there is no
governing treaty, and streamline the investigation and prosecution of international
crime in U.S. courts.52 The bill was not acted on by the 105th Congress (See also CRS
Issue Brief 98038, Nuclear Weapons in Russia: Safety, Security, and Control Issues).

51 House Document 105-272.
52 White House press release, June 9, 1998.

CRS-21
Options for A More Effective Response
As the dimensions of the international organized crime problem grow, an
understanding is emerging that the threat needs to be looked at and attacked in new
ways. Despite recent U.S. Administration, G-7, UN, and other initiatives, a number
of critics argue that the international response has not kept pace with the spread of
transnational crime.
Suggested options for more effectively fighting transnational crime include
better information sharing, not only among intelligence and law enforcement
organizations but also with the private sector and non-government organizations
(especially human rights organizations); expanded bilateral and multilateral
cooperation and coordination; expanded programs of law enforcement assistance for
Russia and Eastern Europe; and designing more pro-active and even preemptive
approaches to fighting international organized crime.
Specific options include:
1) Information Sharing
! In order to gain better intelligence and predictive capacity, governments and
international organizations could significantly increase their information
sharing.
! Some have also said that the U.S. and other governments need to work more
closely with the private sector, exchanging information and sharing
intelligence in the fight against crime. This involves helping businesses to
better know what they are getting into and how to avoid becoming organized
crime targets. Some have suggested that this may require creating
unclassified public data bases on criminal organizations so that companies can
verify with whom they are doing business. The other side of the coin is that
governments could more systematically seek information from the private
sector on its exposure to and experiences with organized crime.
! Some have suggested that activities of criminal organizations should also be
treated as a human rights problem and given publicity as such. At present,
only governments are monitored in official and non-government organization
(NGO) human rights reports. It is argued that criminal organizations should
be publicly monitored and reported on, too.
2. Law enforcement cooperation
! Law enforcement cooperation could be expanded, within the U.S., with Russia
and multilaterally to match the globalization of crime groups. Just as borders
are coming down for criminals, some experts believe they must come down
for crime fighting.53 Where appropriate, efforts could be made to bring
53 A key problem identified by experts is that countries still act individually,
(continued...)

CRS-22
Russia into international groups and organizations set up to fight transnational
crime, beginning with the Financial Action Task Force. Bilateral or
multilateral task forces with flexibility and jurisdiction across borders to go
after international criminals have been recommended.54
3) Harmonizing Legislation
! It has been suggested that anti-crime legislation should be harmonized to the
extent feasible so that criminals cannot exploit discrepancies in the laws of
different countries to elude justice.55

! Some have suggested a treaty or code of conduct among developed or G-7
countries investing in Russia and other former Communist states to deny
export credits to firms doing business with organized crime.56
4) Bilateral Assistance
! Many experts argue that law enforcement assistance and training for Russia
and Eastern Europe has been very beneficial in the fight against international
crime and should be expanded. In addition, some experts assert that further
assistance could also be provided to agencies of the Russian government and
other institutions responsible for regulating the private sector and its
professional standards and business practices to strengthen the ability of
legitimate Russian business to stay clear of Russian crime.57
5) Taking the Offensive against International Crime
! A number of experts have suggested that governments move from a reactive
to a more offensive and even preemptive approach to fighting transnational
53(...continued)
rarely bilaterally, and even more seldom multilaterally. Most of the cooperation that
does occur is still limited to information exchanges on a case-by-case basis.
Confirmation of the problem was provided by the then head of the Russian Security
Service Nikolai Kovalev at meeting of CIS security services heads on October 8,
1997. He stressed that criminal groups of the CIS states were integrating much more
rapidly and effectively than the agencies tasked to combat them. Another good
example of the problem is provided by the Schengen Convention of 1990 among EU
countries. This agreement opened the borders between EU member countries to
people, business, and in the process, to criminals. But it did not open borders for
national law enforcement agencies to act against criminals across borders.
54 The United States and Italy have had significant success with these in fighting
the mafia. Phil Williams. Transnational Criminal Organizations: Strategic Alliances, p.70.
55 Louise Shelley. Eradicating Crime Groups. Foreign Service Journal, September
1997, p. 23.
56 Center for Strategic and International Studies. Russian Organized Crime, p. 12.
57 Center for Strategic and International Studies. Russian Organized Crime, p. 12.

CRS-23
crime, along the lines of recent initiatives in the fights against terrorism and
drugs. To an extent far greater than against terrorists, governments can take
better advantage of the inherent weaknesses and vulnerabilities of criminal
organizations and attack them, it is argued. Their networks are fragile,
vulnerable and penetrable. Coordinated international responses could include
freezing of criminal assets, cross border arrests, and denial of safe havens for
criminals and their money. The ability to sow discord and distrust is great, if
governments work together. Experts believe that criminal organizations can
be penetrated, fragmented and isolated.
Pursuit of new options is hampered by two sets of problems. First, all countries
are reluctant to compromise sovereignty or cede jurisdiction. This is true not only
between countries but even among competing law enforcement agencies within
countries.58 Second, any suggestion of combining the efforts of law enforcement,
defense, and intelligence agencies to help to stem crime raises fears and warning
flags. Such moves have troublesome implications for democracy and civil liberties,
even in established democracies, but especially in the transition states.
58 It is illustrative that when Russian Interior Minister Kulikov unveiled the
government's new crime fighting program in the fall of 1997, he devoted as much
time to reassuring his different agencies that they would not lose power as to
explaining the elements of the program. See Moscow Interfax, October 28, 1997.

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